The Fed’s implementation of monetary easing after the financial crisis, while intended to bolster a teetering economy, is instead leading us into a Pay-the-Piper scenario, says Brian Singer, head of the Dynamic Asset Allocations Strategies team at William Blair in a recent article for Barron’s. “We’ve now seen eight years of ultra-easy monetary policy, which we believe won’t end well,” he says.

Singer recalls two other efforts that had precarious outcomes:

• The “oil shock monetization in the early 70s,” he argues, “did not prevent the Standard & Poor’s 500 from declining 50%.”
• Alan Greenspan’s lowering of interest rates (starting in the late 80s and accelerating in 2000) that, in Singer’s opinion, led investors to believe that the Fed “would always step in a crisis and provide protection on stock market prices.” He notes that the equity markets again went down sharply (especially the Nasdaq, which dropped 70% at one point).

Singer is quick to point out that monetary easing has become an “ineffective” global phenomenon that has “scattered resources to all the wrong places.” This, Singer contends, will have a lasting, and not necessarily positive, impact on the markets. “It’s not that it will end poorly tomorrow or even this year or next year, but we believe it is likely not to end well and have significant ramifications on the markets.”

That said, Singer’s outlook isn’t entirely grim. He explains, “We’re cautious—not necessarily negative—because the U.S. is still a significant safe haven; the least risky of the risky, the asset class and country toward which people around the world continue to gravitate.”